Month: November 2016

Sorry for not posting for quite some time. Have been busy with trying to pass my TP test haha which I unfortunately didn’t :(. Alright back to sharing with you my investment story. This is a story about my first investment mistake which caused me to lose about 70 percent of my initial capital. Before going into that let me share with you the background of this story.

This stock was my first stock ever since I successfully created a DBS Vickers account to trade stocks for real. It was in April 2016 when there was a lot of uncertainties in oil prices where we saw prices drop to a low of $30 per barrel. My initial reasoning for buying this stock in the SGX was that I predict a turn around for oil prices. This is partly because given oil as a limited resource keeping prices low will be damaging to oil dependent countries. Hence, with that reasoning alone, I searched for a stock in the SGX which dealed in the oil and gas sector. And guess which stock I picked?

Noble Group Limited (N21)

Investment experts would laugh at me for buying this stock and hoping for a rebound. Which was unknown to the innocent me back then.

To me, Noble used to be in the STI which comprises of the Blue chips companies in Singapore. It had a strong footing in the Oil and Gas sector. Hence, back then the innocent me bought 750 lots of Noble Group for $0.420 per share. Guess what happened next?

(The stock price is different due to the rights issue they did)

The stock price stumbled like no tomorrow!! I eventually sold at $0.126. (What a painful loss!!!) So what’s the problem here?

1) I did not check its balance sheet thoroughly.

If I did a check on it’s balance sheet I would have discovered that Noble had accumulated huge debt. This was the latest financial report before I bought the stock which I did not check.

Looking at the Current Liabilities column, it had an astonishing USD 2,127,814,000 of Bank Debt!! It’s cash and cash equivalents is only USD 1,953,270,000. Which means if the Bank were to ask back for their money, it is hard to say if Noble can return the bank debt without having to liquidate their other assets. This should definitely had set off some red flags had I knew back then.

2) Failure to cut loss

It may be good to have confidence in your reasoning for your purchase of a stock but refusing to cut loss and hoping for a rebound is a costly mistake that many investors make. We tend to think that if we do not sell our stocks we would only suffer paper loss. However, looking at it in another perspective if it’s a good stock it should never breakdown too much. (Meaning the price would not drop 70%!!!) Thus, keeping a good stop loss is very important. Know when to cut loss, after all there is a myriad of stocks out there for us to choose from!

In conclusion, 2 important lessons here. First, we must learn to study the company very carefully before buying into their stocks. After all buying of their stocks means owning a small part of the company. Do you want to own a successful or a failing business? Hence, remember to do your homework! Next, always have a firm and steady plan for each stock you buy. For instance, when to cut loss, when to take profit etc. That’s all from me today! Hopefully sharing this story can help aspiring investors in some ways 🙂

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